Degn said Kamal sent a flurry of memos to company and U.S. officials in an effort to bring Blackwater into compliance. The Iraqis were concerned that the firm had refused to obtain a license to operate legally in Iraq, a process that required companies to provide sensitive personnel data and submit to weapons inspections. Blackwater also refused to answer any questions about the reported incidents.

Degn said the Iraqis were consistently rebuffed in their requests.

"Kamal went to State several times; he's the one who's been paying the price for this," Degn said. "We had numerous discussions over his frustrations with Blackwater, but every time he contacted the [U.S.] government, it went nowhere."

Degn said he became a close friend of Kamal's and shared the deputy minister's frustrations, even as he recognized the complexity of reconciling Blackwater's relationship with the Iraqis while trying to protect the State Department. Degn said Blackwater's reluctance to cooperate was understandable, given that the Iraqi Interior Ministry had been infiltrated by sectarian militia members.

Kamal said addressing Blackwater's alleged actions was also a matter of preserving Iraq's dignity and honor. Seated in his spacious office, he recalled an incident two months ago when Blackwater guards threw a water bottle at a traffic policeman. The officer was so furious that he submitted his resignation, but his superiors turned it down, Kamal said.

"This is a flagrant violation of the law," Kamal said. "This guy is an officer with a rank of a brigadier general. He was standing in the street doing his job, regulating traffic. He represents the state and the law, and yet this happened."

The topic of Blackwater's impunity was discussed during high-level meetings involving American and Iraqi officials, including Kamal, national security adviser Mowaffak al-Rubaie and senior officials from the U.S. military and the U.S. Embassy, according to sources familiar with the discussions.

Tensions escalated over a series of incidents beginning last Dec. 24, when a Blackwater employee allegedly shot and killed a bodyguard for Iraqi Vice President Adel Abdul Mahdi inside Baghdad's Green Zone. It remains unclear how the Blackwater employee was able to leave Iraq after the incident, which triggered a Justice Department investigation. No charges have been filed.

On May 24, a Blackwater team shot and killed an Iraqi driver outside the Interior Ministry gate. The incident triggered an armed standoff between Interior Ministry commandos and the Blackwater guards, who later told U.S. Embassy officials that the driver had veered too close to their convoy. Blackwater refused to give the guards' names or details of the incident to the Iraqis. The State Department said it planned to conduct an investigation, but no results have been announced.

It is unclear whether Blackwater could be criminally prosecuted in Iraq. A U.S. regulation called Order 17 enacted after the invasion by Iraq's U.S. administrators provides immunity from prosecution for private security contractors.

Kamal, a lawyer by training, suggested that Iraq's government could file lawsuits against Blackwater in U.S. courts to seek compensation for the victims.

"If Order 17 provides them with immunity from being questioned or the right to be tried under Iraqi law, it does not prevent the Iraqi government from filing suit in an American court," he said.